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Measurement of the labour market effects of disability on household welfare


Research objectives and content
Disability imposes many costs upon the individual. This project proposes to measure the costs of disability which occur through the operation of the labour market. One of the major innovations of the project is that it examines the effects of disability on the labour market in both a static and dynamic framework. The project has three main parts: first is the estimation of household welfare for the disabled via their labour market characteristics, secondly the measurement of the factors affecting labour market transitions for the disabled and finally the estimation of whether and how much discrimination against the disabled exists in the labour market.
The initial part of the project involves the estimation of participation and labour supply for the disabled. This will enable us to examine how the labour market experience for the disabled differs from that for the fully-abled. From the estimation of participation and labour supply equations, measures of household welfare via the real wage function can be calculated and the welfare loss owing to the different labour market outcomes for the disabled can be evaluated. This analysis may also permit estimation of the welfare effects of various proposed reforms. The second part of the project introduces the dynamic framework in to the analysis. Here we propose to examine transitions between labour market states for the disabled and evaluate what factors are important. This can be performed using the techniques of multiple state transition models and the estimation of the relevant hazard functions to determine whether and how disability affects labour market transitions. For example, it will be possible to estimate how disability affects the probability of becoming unemployed and also how it may affect the probability of returning back to employment from a state of unemployment. This represents a major extension of the work by Thompson and Walker (Disability, Wages and Labour Force Participation: Evidence from UK Panel Data, Keele Economics Working Paper 96/14).
In the final part of the project through examining wage equations for the disabled and using standard decomposition techniques. we can estimate whether and how much labour market discrimination exists against the disabled. The findings from this pan of the project can also feed back into the welfare analysis of the first pan of the project, since differences in wages and labour supply will have obvious welfare effects which can be evaluated using techniques such as real wage functions.
The project would benefit from being associated with a wider comparison between UK, US (using PSID data) and Germany (using GSOEP) to be funded by the Esmee Fairbairn Trust.
Training content (objective, benefit and expected impact)
The major training content of this project is the use and microeconometric analysis of large micro data sets, in this particular case, the British Household Panel Survey (BHPS). The Economics Dept. at Keele have considerable expertise in this field and the applicant could obviously benefit from such experience. It is expected that a period of training in the use and analysis of such data sets would be of considerable use to the applicant on return to his native country (where such data sets are now becoming generally available for use by research institutions), thus providing further benefits apart from those directly connected with the above project.
Links with industry / industrial relevance (22)
The findings from this project will help firms to formulate policies for their disabled employees and respond to the Disability Act which comes into force on Dec 2, 1996. The Department at Keel has strong links with policy makers and pressure groups in the context of disability.

Call for proposal

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University of Keele

ST5 5BG Keele
United Kingdom

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EU contribution
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Participants (1)